March 14, 2013

7 Key Tax Protests That Shook America

Resisters have tried violence and politics, but the taxes keep rolling on

Tax collectors had it rough in the 18th century. AdvisorOne looks at the history of violent, and peaceful, tax protests. Tax collectors had it rough in the 18th century. AdvisorOne looks at the history of violent, and peaceful, tax protests.

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From the Boston Tea Party to its modern-day namesake, tax protests are wired into the DNA of American history. Everyone, it seems, likes to complain about taxes, even if most pay them. There have been famous examples of those who refused to pay, like Al Capone.

The permanent creation of the income tax in 1913 is a particular source of anger for many. Some have turned to violence, others to politics. Either way, the protests have caught the public’s attention and spurred heated debates over the last 250 years. No matter any short-term-gains, in the long run taxes have continued to spur anger and dread.

Here is AdvisorOne’s look at 7 Key Tax Protests That Shook America:

Stamp Act protest1. Stamp Act, 1763

The first tax protest in Colonial America was aimed at the 1765 Stamp Act, which was approved by the British Parliament to pay for troops stationed in North America. It mandated the use of official “stamped” paper for legal documents, newspapers, bills of lading and other written instruments. The Colonists were incensed, arguing that a direct, internal tax was beyond reasonable.

Protests by colonial governments like Virginia, along with the writings of future revolutionaries John Adams and Patrick Henry fell on deaf ears. In Boston and New York, the stamp master was hanged in effigy. The Boston protests escalated, with a mob destroying a government official’s home. After months of debate leaving colonists caught between disobeying the crown and violating their own principles, Parliament repealed the Stamp Act.

Boston Tea Party2. Boston Tea Party, 1773

The next step toward revolution was the passage of the Tea Act in 1773. The law was intended to help the East India Co. by allowing the tea leaves to be sold at prices below smugglers’ rates. It added a tax, which British authorities thought wouldn’t be onerous since the price of the tea would be so low. That was a miscalculation.

On three occasions, colonists dressed as Indians dumped tea into Boston harbor while it waited to be unloaded. The authorities in London were furious: How dare the colonists destroy property! In response, the so-called Intolerable Acts promised a crackdown on protests in the Colonies. One of them closed the port of Boston until the East India Co. was reimbursed. The acts were the last step to revolution.

Whiskey Rebellion: tax collector is tarred and feathered3. Whiskey Rebellion, 1791-1794

All governments need revenue to conduct business. The new American Congress was no different. They turned to taxes, of course. No matter that unpopular levies had spurred the Revolution. The Treasury secretary, Alexander Hamilton, proposed an excise tax on liquor in 1791.

The farmers of Western Pennsylvania had found that turning their grain into whiskey made it easier to transport and enabled it to be used in lieu of hard money. Protests grew after a bill to enforce the legislation was approved by Congress. Harking back to not-so-distant Colonial times, 500 protesters marched on and burned the home of a regional tax inspector. The president In 1794, George Washington, working under the aegis of Congress, sent 13,000 troops to the area. Without further violence, the Whiskey Rebellion was over. Two people were tried and convicted, but Washington pardoned them. The federal government’s tax collection authority was established.

Howard Jarvis (right) celebrating during Prop 13 vote. (Photo: AP)4. California Taxes: Proposition 13, 1978

California’s constitution allows for direct votes on nearly any proposed law. For decades, taxes were kept low through the use of propositions. The granddaddy of them all was Proposition 13, which was passed by voters in 1978. Proposition 13 capped property tax hikes at 1% annually and used the purchase price of a property as the taxable amount rather than the assessed value used in most states. Opponents lost court battles aimed at the measure’s constitutionality. You might think that the man who led the campaign for Prop 13’s passage would be a hero.

But many soured on Howard Jarvis, who had urged many apartment dwellers to vote “yes,” telling them that landlords would lower rents because of the tax savings they would enjoy. Landlords kept rents the same while pocketing the tax break.

California fell into a long period of low taxes. Trapped by one budget crisis after another, the state faced serious problems funding schools, prisons and other essential services. Finally, in 2012 voters approved Proposition 30, which raised income taxes on the highest earners and increased the sales tax but left the property tax alone.

And what of Jarvis? The onetime senatorial candidate died in 1986 (after a cameo in the movie farce “Airplane!”), but his legacy lives on: many view him as the father of rent control, which was passed in the wake of the Prop 13 backlash. It turns out Jarvis was working out of the landlords association offices when he campaigned against the property tax. 

Gordon Kahl5. Tax Violence I: Gordon Kahl, 1983

In the last three decades, there have been several instances of tax resisters using violent means to make their point. Two stand out. This spate of attacks linked to tax protests started with Gordon Kahl in 1983. Kahl had stopped paying his income taxes in the late 1960s, declaring that the government was under Communist control. The IRS went after him in the mid-1970s, and he served a year in prison. The sentence didn’t deter Kahl, who continued to skip paying income taxes. When U.S. marshals tried to arrest Kahl on Feb. 13, 1983 in Medina, N.D., a shootout ensued. Two law enforcement officials were killed at a roadblock from which Kahl escaped. He was tracked to Smithville. Ark., where on June 3, Kahl and a county sheriff were killed in another shootout. Kahl’s wife, son and others who helped him went to prison.

Joseph Stack (Photo: AP)6. Tax Violence II: Joseph Andrew Stack III, 2010

The second violent protest that caught our attention was spectacular. Andrew Stack III perpetrated it in February 2010 when he crashed a small plane into an IRS office in Austin, Texas. The crash killed Stack, a regional director of the agency and injured two others. Stack had filed for bankruptcy 1998, citing $126,000 he owed the IRS. His suicide note cited the bank bailouts, big companies and most especially his troubles with the IRS. His note, which was 3,000 words long, also showed his anger at “wonderful deductions” the IRS refused to allow, according to the Christian Science Monitor. Some in the tax protest movement cheered his method.

A Tea Party protester in 2011. (Photo: AP)7. Tea Party Protests, 2009

Taking their name from those original Boston tax protesters, the collection of groups that came to be known as the Tea Party had a common aim if not central leadership. Opposition to taxes, often in almost any form, binds them together. The exact origins of the movement are the subject of much debate, with various accounts tracing them to Ron Paul’s 2008 presidential campaign, a 2009 Seattle protest over the stimulus bill signed by President Barack Obama and a New York protest against state tax policies the same year, among other events.

Never breaking away as a new political party, the Tea Party movement has taken pride in running its far-right candidates as Republicans, often toppling mainstream GOP stalwarts like Sen. Richard Lugar in Indiana or anointing stars like Sarah Palin of Alaska.

Theda Skocpol, a Harvard sociology professor, says the Tea Party will continue to influence the Republican Party. Quoted by the Harvard Crimson, Skocpol says hatred (a self-descriptive term) of Obama was key to the movement’s start, but that contrary to what liberal detractors might think, those in the Tea Party are sophisticated and educated.

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Check out AdvisorOne’s special report home page: 20 Days of Tax Planning Advice for 2013.

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